News Release

Vietnam

Vietnam Market Weekly Highlight W23 2016

2016-06-09T05:00:00Z

Japanese investors are continuing to take advantage of Vietnam’s real estate market opportunities with new projects.

FDI to HCMC decreases by 38 percent

Foreign direct investment (FDI) in HCMC, the country’s major economic hub, has fallen 38% year-on-year since the beginning of this year, according to the city’s Statistics Office. As of the middle of May, the office reported total FDI of approximately USD 650 million. Nearly 280 FDI projects were awarded investment certificates, worth a total of USD 482 million. Some 48 projects had value added with a capital of USD 166 million. According to the office, total FDI flow significantly dropped by USD 408 million over the same period last year.

Vietnam is predicted to continue running a trade deficit in 2016 that will be under 5% of total export revenue, according to the Ministry of Industry and Trade (MoIT). At a teleconference on June 6, Director General of the MoIT’s Planning Department Vu Ba Phu said the country recorded a trade deficit of about USD 400 million in May. Although there was a trade surplus equivalent to 2% of total export value in the first five months, demand for imported machinery and materials for infrastructure building is still high.

Japanese investors are continuing to take advantage of Vietnam’s real estate market opportunities with new projects. Sanyo Homes Corporation, a Japanese housing developer, has recently entered Vietnam’s real estate market through a partnership with a member company of Hoa Binh House JSC. Prior to Sanyo’s entrance, many other Japanese investors made similar moves here. Analysts have noted that more and more Japanese investors are looking at the real estate market here, despite recent difficulties due to low demand.

Facing a severe shortage of parking space, Hanoi recently issued a regulation that high-rise building projects and trade centres must have at least three basement floors for parking. The document did not specify the scale or position of the projects that had to comply with the directive. In the downtown area where there was critical shortage of parking space, the regulation for a building to have at least three basement floors was understandable, but in areas on the outskirts it could be unnecessary.

Vietnam’s total retail sales and services revenue reached VND 1,430 trillion (USD 63.4 billion) in the first five months of this year, a year-on-year increase of 9.1%, officials said. If inflation is excluded, the amount marks an increase of 7.8%, according to the General Statistics Office (GSO). Vu Manh Ha, GSO expert, said the growth of the total retail sales and services revenue in the first five months of 2016, excluding inflation, was lower than the 8.2% growth in the same period last year. This meant purchasing power was on the decline.

It is expected that retail growth will reach 11.9% by 2020 with a retail market size of USD 179 billion, of which modern retail will account for 45%. The HCMC People’s Committee has met with local retailers in the city to identify solutions to countering the rising number of foreign retailers. The meeting gathered a number of major enterprises in the retail and distribution sectors in the context of Thailand’s Central Group recently completing the acquisition of Big C, worth USD 1.14 billion. No solutions or detailed plans have been made available to the public.

Two Italian retailers - Coop Italia and Conad - have agreed in principle to allow Vietnamese goods to be sold on their shelves, the Ministry of Industry and Trade (MoIT) has announced. This was a major outcome of trips made to Italy and France from May 28 to June 5 by a MoIT delegation led by Deputy Minister Ho Thi Kim Thoa under the 2016 National Promotion Program and a plan to assist Vietnamese enterprises to directly participate in foreign retail distribution networks to 2020.

Property businesses have pointed out the difficulties they are facing and asked HCMC leaders to deal with them to give a boost to the fragile property market. Le Hoang Chau, chairman of the HCMC Real Estate Association, told that the land use fee has been weighing on enterprises and consumers. A major concern is that how big the fee is cannot be known in advance, making it hard for investors to make investment decisions, which easily leads investors to ask authorities to do them a favor. This practice gives rise to corruption.

There will be at least two telecommunications enterprises allowed to provide services for apartment buildings in Hanoi starting on Monday, to avoid the current monopoly situation. The Hanoi People’s Committee recently issued a decision regulating installation and the management and usage of centralised inboxes, telecommunications cabling systems, and coverage systems in high city buildings with multiple owners. The decision takes effect on June 6. This will boost competitiveness in providing services among telecom enterprises.